Virginia's public colleges and universities will face smaller state budget cuts than expected next year, Gov. Terry McAuliffe announced Friday.

Instead of preparing for 7.5 percent cuts in fiscal 2018, which begins July 1, campuses will be asked to find 5 percent savings, McAuliffe said during a speech before legislative budget writers.

Improving state revenues in the months since state leaders identified a $1.5 billion gap between predicted budget revenues and the state's actual trend line led McAuliffe to moderate this cut. He also found revenue by proposing an increase in the number of businesses required to charge sales taxes on online purchases and by proposing an amnesty program to collect delinquent taxes next year.

His administration cast his new two-year budget, covering fiscal 2017 and 2018, as a conservative plan in the face of improving revenues. Republican budget writers expressed more skepticism, with Senate Majority Leader Thomas K. "Tommy" Norment saying some revenues "are perhaps not as robust as the governor suggests."

The legislature will overhaul some parts of the governor's proposal, and tweak others, after it goes into session Jan. 11. Budget writers will have more revenue data on hand, including from the holiday shopping season, when they get to the meat of that process.

RICHMOND — Gov. Terry McAuliffe proposed nearly $32 million in new spending on mental health reforms and anti-addiction programs Wednesday, and also promised a robust legislative package to go with the funding.

Mental health advocates applauded the $8.2 million McAuliffe wants to beef up staffing...

RICHMOND — Gov. Terry McAuliffe proposed nearly $32 million in new spending on mental health reforms and anti-addiction programs Wednesday, and also promised a robust legislative package to go with the funding.

Mental health advocates applauded the $8.2 million McAuliffe wants to beef up staffing...

(Travis Fain)

The governor did not include Medicaid expansion in his budget, per se, which is a departure after three years in office. But he did remove a clause blocking expansion, which Republican legislators previously wrote into the budget. McAuliffe replaced it with language allowing him to expand the program if it still exists come Oct. 1.

That will give time, McAuliffe argued, to see what President-elect Donald Trump and the Republican Congress do with the Affordable Care Act, which underpins expansion. They have promised to repeal at least some of the ACA, also known as Obamacare, but it remains to be seen how transformative those changes will be.

CAPTION

The federal indictment, brought by special counsel Robert Mueller, represents the first charges accusing Moscow of meddling in the 2016 U.S. election, and says Internet Research Agency, a Russian firm known for using troll accounts, orchestrated the interference campaign as part of a larger operation.

The federal indictment, brought by special counsel Robert Mueller, represents the first charges accusing Moscow of meddling in the 2016 U.S. election, and says Internet Research Agency, a Russian firm known for using troll accounts, orchestrated the interference campaign as part of a larger operation.

CAPTION

South African President Jacob Zuma resigned, ending nearly nine years of rule marred by corruption scandals and fiscal mismanagement that inflicted serious damage on one of Africa's biggest economies. (Feb. 14, 2018)

South African President Jacob Zuma resigned, ending nearly nine years of rule marred by corruption scandals and fiscal mismanagement that inflicted serious damage on one of Africa's biggest economies. (Feb. 14, 2018)

Virginia Republican leaders have promised to monitor and respond to federal changes through a joint legislative committee, and they looked askance Friday at McAuliffe's proposal.

"The House will continue to hold the line against any form of Medicaid expansion," Speaker of the House William Howell promised in a statement.

McAuliffe told reporters after the speech that if expansion is still around in October, "then the program is here to stay" and Virginia should get on board.

Expansion would provide billions in taxpayer-funded health insurance for hundreds of thousands of low-income Virginians, many of them the working poor. The state's existing Medicaid qualification rules are among the strictest in the nation.

The proposed budget contains no programmatic cuts to public schools, public safety, the state health system or local funding, McAuliffe said. State employees and teachers would get a previously announced 1.5 percent bonus at the end of 2017, replacing a raise that was removed from the budget following the revenue miss.

Norment, who co-chairs the Senate Finance Committee, said he wasn't sold on the bonuses, saying he'd prefer raises if the state can afford them.

McAuliffe proposed cuts for a number of smaller programs, including the 2019 Commemoration at Jamestown. The governor dropped some $6 million from the event's budget, and he took smaller amounts from various line items attached to Jamestown-Yorktown museum operations.

He'd leave about $5 million for the commemoration, divided over the two budget years.

The commemoration, to mark 400 years since a number of seminal events in Virginia and U.S. history, is a favorite of several powerful lawmakers and successful business people, some of whom serve on the foundation's board.

"We'll have to scrutinize those (cuts) pretty carefully," said Norment, R-James City. "I am confident that the Commonwealth of Virginia wants to maintain its prominence in history."

The governor cut GO Virginia a bit, removing some proposed funding for the regional job creation program developed during last year's legislative session. He proposed a number of changes at the Virginia Economic Development Partnership, which recruits companies to Virginia using grants and tax credits.

McAuliffe has said the executive branch should have more control over VEDP, something legislators may not be willing to grant.

The governor added $1 million in fiscal 2018 to modernize VERIS, which is the computerized backbone of Virginia's voter registration operation. The system ran slowly during the run-up to the November presidential election, and it crashed at least once as people tried to register online just ahead of the deadline. A federal judge extended the deadline as a result.

The budget includes new money for the Virginia State Patrol and local sheriffs deputies to address longstanding issues with their pay scales, something McAuliffe announced earlier this week. The governor also proposed increases for mental health care, including funding to help most of the Community Service Boards in the state provide same-day access to services, meaning people won't have to call days in advance for appointments.

McAuliffe rolled out the details of his mental health proposals Wednesday, and the package also includes bills that would restrict the prescription of opioid pain killers, which, along with heroin, are part of an overdose epidemic in the state.

The Medicaid budget will increase due to forecast changes and because of changes at the federal level. But it won't go up by the full $281 million, over the two-year budget, that the administration recently predicted. The new figure is about $255 million.

The governor's new budget includes about $1.26 billion less in revenue over the two year period than the version the General Assembly adopted earlier this year. McAuliffe bridged some of the gap by assuming $12.6 million in new online sales tax revenue.

House Appropriations Chairman S. Chris Jones called the proposal "only fair." He and other state leaders have hoped in vain for several years that the federal government would deal with internet sales taxes at the national level, saying it would boost state revenues here by $250 million to $300 million a year.

McAuliffe's proposal would affect only companies with a "nexus," such as a warehouse, in Virginia.

The governor also wants to juice revenues over the next two years with a couple of short-term programs. He plans a tax amnesty in fiscal 2018, giving delinquent taxpayers a break on interest and penalties. McAuliffe estimates a pickup of $59.2 million. Jones, R-Suffolk, said he will sponsor this bill.

McAuliffe would also alter the state's accelerated sales tax plan, which requires businesses around Virginia to pay sales tax into the state a month early at the close of each fiscal year. The program, on Virginia's books for years, is unpopular and considered a budget gimmick. State leaders have been trying to roll it back in recent years.

McAuliffe's proposal would keep the accelerated month in place for businesses with at least $2.5 million in taxable sales come June 2017 and up that to $4 million at the end of fiscal 2018. The existing budget would have rolled this program back further, making it affect fewer businesses.

McAuliffe's change would raise some $47.9 million for this two-year budget. Norment promised to review the proposal "very carefully."